Alberta losing billions in oil royalties: report

A research institute says Albertans are losing billions of dollars because of what it calls overly generous royalty cuts to the oil and gas industry.
Regan Boychuk, public policy research manager with the Parkland Institute, says in a new report that Albertans have lost billions of dollars to government mismanagement of the oil and gas royalty regime.

Albertans are losing billions of dollars because of overly generous royalty cuts to the oil and gas industry, a research institute says.

Regan Boychuk of the Parkland Institute, a think tank based at the University of Alberta, studied the industry's profits for the past 10 years.

In a reported titled Misplaced Generosity, Boychuk says the percentage of profits claimed by the provincial government has steadily declined.

"Just the last year we looked at it — in 2008 — if the government had met its own targets, that would have meant an additional $14 billion in royalties," Boychuk told CBC News.

"That far exceeds any deficit that the province has experienced in the course of a very serious recession."

Boychuk, public policy research manager with the Parkland Institute, estimated that the government has lost $69 billion in potential revenue by not meeting royalty targets since 1999.

A spokesman for the Canadian Association of Petroleum Producers said royalties are not the only way to measure what the industry contributes to the province.

Travis Davies said a low royalty rate attracts investment, which creates jobs and tax revenue.

"As a direct result of that competitiveness work, you have on the order of two or three times as much activity in the province and you also have made record land sales, which point to the future. I mean, that's going to be development," Davies said.

The government completed its own royalty review in 2007. That report also recommended higher royalty rates, many of which were implemented but then pulled back during the global economic downturn.

In March, the province announced the maximum royalty rate for conventional oil would be cut to 40 per cent of revenues from 50 per cent, and the top rate for natural gas would be cut to 36 per cent from 50 per cent.

Those changes will take effect in January.

The Alberta government recently announced it would run a $5-billion deficit this year.